Taxes and death are inevitability, but that doesn’t mean you can’t prepare for both! Taxes effect you almost every day in the form of sales tax, every year in the form of income tax and even at death with the estate tax.
There are certain things to know when it comes to understanding W2 forms. You can check out our basic guide here to learn more.
Whether you’re an employer or employee, you’ll need to know what a W-2 form is.
W-2 forms are used for tax filing purposes and most people are legally required to file them. Without them, you run the risk of paying hefty fines and getting jail time. Understanding W-2 forms isn’t as difficult as many people think!
When it comes to getting a W-2 form, all you need to do is print out a copy from the internet. From there, you can start filling out the numerous boxes that require employee information.
Keep on reading to learn more about W-2 forms and how to fill them.
What Is a W-2 Form?
A W-2 form is an important form that’s provided by employers. They detail how much an employee has made throughout the year. Along with the total income, W-2 forms will show all deductions, such as taxes.
Most people that have jobs are required to fill out W-2 forms. However, those that work independently (independent contractors) need to fill out 1099 forms. If an employee of a company has earned at least $600 throughout the tax year, the employer will need to send them W-2 forms by January 31st, which is the deadline.
Anyone that’s made less than $600 may not be provided W-2 forms unless they had deductions for Medicare, Social Security taxes, etc.
Unlike W-4 forms, which are filled out by employees, W-2 forms are filled out by employers. Most people have the misconception that they’re filling out W-2 forms, when in fact they’re doing a W-4 form.
How Many You Need
If you’re an employer, you’ll need to come up with 6 copies of every W-2 form. Three copies go to employees, two to the government, and you’ll keep one (Copy D).
The copies that are sent to the government are Copy A and Copy 1. You’ll need to send Copy A to the Social Security Administration (SSA). Copy 1 will be sent to your employee’s local tax department. You’ll then provide your employee with Copy C and they’ll file their taxes with Copy B and Copy 2.
W-2 forms need to be mailed, so don’t rely on sending them digitally. You can give your employees the option to make digital copies, but they’ll need to mail them to the government. You find get W2 online copies to fill out and provide to employees.
Filling Out W-2 Forms
Many employers have a hard time filling out W-2 forms, especially when they’ve never done them before. It’s possible to hire someone to do them for you, but you should understand how to do them in case you can’t. The process doesn’t take long, but you’ll need to pay attention to a lot of information.
The first thing you’ll need to do is insert your employee’s Social Security Number (SSN) and the top of the form. Below that is where you’ll put your Identification Number (IN), name, and mailing address.
After you’ve filled out that information, the next thing to do is start filling in the boxes:
Boxes 1 through 10 consist of general information about an employee. In box 1, you’ll fill in your employee’s annual earnings, including both wages and tips. Within that box, you should include taxes into the number, but don’t include deductions from IRAs.
You’ll then put the employee’s federal income taxes, Social Security taxes, and Medicare taxes into boxes 2, 4, and 6.
If they’ve received tips, you’ll include the total number that they’ve reported in box 7. Box 8 is where you’ll put their actual earnings from tips. Box 9 doesn’t require anything because that box is no longer used in the tax filing process.
In box 3, put how much of their income went to Social Security, but don’t include the money made from tips.
These boxes are meant for employees some form of a retirement plan, such as a 457(b) plan. The amount that’s deducted from an employee’s income and put into the retirement plan will go into box 11. In box 12, you’ll insert a variety of codes and amounts that are based on the benefits the employee receives.
You can find a list of the codes on the back of the W-2 form along with directions on how to do them.
In box 13, you’ll need to indicate whether the employee has a retirement plan, receives pay from a third-party, and is a statutory employee. One thing to consider is that employees hired as independent contractors may be counted as statutory employees.
You don’t have to put that much information in these boxes compared to the others. Your state and employer state ID, if the state requires it, will go into box 15. In 16, your employee’s taxable earnings by the state will be inserted. Any money that’s been deducted must go into box 17.
Earnings that can be locally taxed must go in 18 whereas the deducted money going into 19. In box 20, you’ll put the location in which you’re sending the tax information to.
Understanding W-2 Forms Has Never Been Easier
The 2019-2020 tax year W-2 forms have already been sent, so you won’t need to worry about them until next year. After understanding W-2 forms and how they work, you’re ready to fill them out for the next tax year.
If you have a large number of employees, it may be wise to hire someone else to fill out the forms. This will reduce your workload and let you focus on other parts of the business.
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